Asked on 01 Sep 2020
I am looking to get a term plan. 25yo, Budget for term plan to be < 2k a year.
Before looking at getting a term plan first, do look at what you are intending to cover.
Is it death/TPD? Is it CI?
Plans have evolved a lot over the years and insurers have become far more competitive when it comes to pricing.
If it is a vanilla death/TPD cover that you are looking for, then there isn't really too much difference and you can go for the term plan with the cheapest coverage, after considering how much coverage you need, and how long you need this cover for.
If it is CI however, things get a little more complex. There is multi pay CI (which comes as a term), a term plan with accelerated CI rider, as well as whole life plans covering CI. Although you have a budget of less than $2K a year, you also need to consider situations such as whether you will still need CI cover in your retirement, and on top of all that, the total cost of a whole life vs that of a term CI plan. Very often (and given your age), you will find that the total cost of a whole life could be lower than that of a comparable term plan, with the added advantage of retaining your CI cover for the rest of your life.
Furthermore, when it comes to CI, there are many features that may impact your final decision, as not all plans are created equal. As an example, a whole life CI plan may cover different number of CI conditions, some may have more special benefits than others, and some plans may pay out the accumulated bonuses on top of the multiplier amount. All these will have an impact on which plan you deem suitable to your needs.
Seek proper advice and look at various permutations before you decide what to buy. It's a long term commitment and you want your money to be working best for you. Speak to an advisor in order to get more information, quotes, etc.
02 Sep 2020
Hi Elijah, thank you for the in-depth explanation. I’m actually looking to get a life plan with early CI that covers through retirement. I was quoted a 2.5k/yearly for whole life plan and found out that term plan isn’t any cheaper for the same coverage. As I was under the belief that term is always cheaper but I did not consider eCI to be so expensive. Thank you for sharing!
02 Sep 2020
Hi QP, that's precisely the point. People have been so ingrained in the BTIR concept that they have not seen that WL plans have evolved so much over time that sometimes, a term is not necessarily the best solution. It's not because of higher premiums = higher commissions, but what is the plan that truly suits your needs? (In this case, having some early CI cover in retirement). If people will actually sit down and look at the premiums for a term with early CI with coverage till retirement age (since no one can possibly know when you will get CI), a life plan makes far more sense. Let the numbers guide you.
02 Sep 2020
Hi Ninja, yes I have the same thinking too. Unfortunately it’s not the case with me as I’m getting eCI coverage and it doesn’t work out to be much cheaper..
03 Sep 2020
Not a believer of early ci...pay so much to curse myself 😂